Civil Procedure Rules (CPR) are designed to improve access to justice by making legal proceedings cheaper, quicker, and easier to understand.
From April 2015 there will be changes to Part 36 of the rules, which focuses on offers to settle a dispute. This is one of the litigator’s most effective weapons, but it is extremely technical and can be easy to get wrong if you don’t have the right expertise.
CPR Part 36 is the mechanism designed to encourage parties to settle disputes before trial, by imposing costs sanctions on a party who refuses an offer, but then fails to get a better result at trial.
The new rules, due to come into effect on 6th April 2015, are designed to create clarity, but it is important to make yourself aware of the changes and how they might affect you.
Summary of changes:
- Genuine attempts to settle: The court will now consider whether an offer made was a genuine attempt to settle the proceedings. This is because problems can arise when a claimant makes a Part 36 offer for practically its whole claim. In this situation, unless the case is absolutely unbeatable, a defendant is unlikely to settle rather than go to court and take its chances. Now, the court can decide whether it would be unjust to apply Part 36 consequences, even though the criteria has been met.
- Clarity around time limited offers: As things currently stand, “time limited” offers (only open for acceptance for a certain period of time), do not constitute a valid Part 36 offer. This has led to some confusing case law around when the offer is actually withdrawn. From now on a Part 36 offer will be automatically withdrawn after expiry.
- Knowledge that a Part 36 offer has been made: Generally the judge at trial should not even know a Part 36 offer has been made. Now a judge in a split trial (where quantum and liability are considered separately) can be told about the existence, but not the terms, of Part 36 offers at the end of the liability hearing.
- Allowance of Part 36 offers in any claim: The new rules expressly allow Part 36 offers in any claim, counterclaim or additional claim, and deal with the application of Part 36 to appeals. This will help clarify which party actually has the bigger financial claim, and therefore who ultimately obtains a judgement that is “at least as advantageous” as the Part 36 offer.
- Clarification over withdrawing an offer and changing its terms: Where a party changes the terms of the offer to make it more advantageous it will now be treated as a brand new offer rather than a withdrawal of the old offer.
- Allowing 50% recovery of costs: Where a party has failed to file a costs budget in time the general rule is that it can only recover court fees. This provides little incentive to accept a Part 36 because the cost consequence of failing to do so are limited. The new rules will allow 50% recovery of costs that would otherwise be recoverable (from expiry of the Part 36’s relevant period) and costs are no longer limited to court fees.
For more information about how these changes might affect you, contact Susan Howe, Partner and Head of Dispute Resolution Team on 0191 211 7920.